>> this week on "q&a" marty sullivan, the chief economist for tax analysts a nonprofit organization that provides news and analysis on state, federal and international tax related issues. host: marty sullivan, i want to introduce you to our audience the same way we were introduced to you in the "washington post"

in october of 2013 headline "marty sullivan picked out how the world's biggest companies avoided billions in taxes, here is how he wants to stop them". what did you think of that? guest: it was a quite flattering article. it was great that after all of these years of digging through the data, me and my colleagues at tax analysts, we were getting more recognition. host: here it is. i have it on my lap sunday october 27, 2013. you are in a garage. when did steve pearl p stein get interested in the story? guest: he contacted us in the middle of the story. we had trouble getting together. there was a government shutdown and caused traffic jams and snowstorms and finally we got together for an interview. he came to my garage and we sat there and drank coffee and talked about five or six hours. host: what do you do? guest: i'm an economist. i work at tax analysts. i write articles every week on tax issues.

host: what is tax analysts? guest: tax analysts is a nonprofit, nonpartisan organization. it is headquartered in falls church, virginia. now we are very well established, we have 200 employees. there are journalists, lawyers, economist economists, editors. we have capitol hill correspondents. we have a network of correspondents around the world. and in all 50 states. host: who pays for it? guest: we are a nonprofit. we don't get any contributions that i'm aware of. we don't get any grants. we funds ourselves through subscriptions to our publications. host: let me read some of what steve pearl stein wrote. teams at george mason university. it frwas someone who shined an early light on how companies have again nation manied transfer prices the price one

division charges another for parts or services to shift profits to low tax jurisdictions. explain that. guest: transfer pricing is a very obscure term to most of the general public. but if you are at all interested in tax policy, at all interested in corporate tax policy it is very central to what is going on. that is the first thinking i want to point out. what that means is that when multinational corporations do business with different parts of their business so they might have a u.s. headquartered company and its subsidiary perhaps in france, they are always transacting with each other. they are treating services an good goods. and how you set the prices of those transactions will determine how the profit is allocated between the two jurisdictions. and, again, that sounds like something well who cares. but just minor adjustments to the prices you can shift a hell of a lot of profit out of the united states and into a tax haven. that is the name of the game in corporate tax planning in the

2000's. host: i will come back to some of that. number two, he says it was sullivan who had called out the big drug and tech companies for transferring ownership of their patents and trademarks, the source of much of their profits to subsidiaries in ireland and other low tax jurisdictions. how did you find it? guest: i just grub through the data and the tax positions, the tax returns of multinational corporations are private. we cannot access them at all. however, we have other sources of information provided by the census bureau and by the 10-k's, annual reports of the companies themselves. so, being a data person i started looking through them and about 10 or 15 years ago we started looking at the census department data and something very strange pops out. when you look at the profits of multinationals if you look at a map of europe you see germany,

france, ireland, italy. but if you look at the data on where the profits are, it leads to france, germany, ireland. hugely disproportionate amount of profit was in ireland. that was one indication that something was going on. the other place to look is where the company annually reports and as much as they don't like to tax planning, they have to disclose it in some way to their shareholders because it is one thing that gives them very high profits when they report to their shareholders on wall street. so it is a very important factor in keeping a stock price high. host: can you tell us a couple of companies that have all that profit in ireland? guest: sure. well, there is no need to single out any particular one company because almost all of them do it. so, all of the major pharmaceutical companies just

for examples because pfizer, amgen and all the technology companies, almost all of them participate this way. they would be tpwaogle, apple -- google, apple, microsoft, cisco. they are all -- because they are able to, they are not doing anything illegal. they are all transferring their profits out fof the united states and into ireland or other tax havens. and even since then ireland's rate, which is 12.5%, isn't low enough any more. they transfer it out of ireland maybe into zero tax jurisdictions like bermuda. host: what is in it for ireland or bermuda? guest: well, tax havens compete with each other and they compete to attract business to them. some tax havens like bermuda don't attract any jobs directly in terms of manufacturing or the companies creating jobs there but they provide the financial services, lawyering and accounting that you need to set up these financial structures.

in ireland they are able to attract a fair number of jobs. in ireland the number is not exactly but between 80,000 and 100,000 jobs were created in ireland by u.s. corporations. host: here is tim cook who runs apple back in april testifying before congress and explained this after he finished. [video clip] >> it is in the spirit that we recommend a dramatic simplify kicks of the corporate tax code. this reform should be revenue neutral, eliminate all corporate tax spend clears, lower corporate income tax rates and implement a reasonable tax on

foreign earnings that allows the free flow of capital back to the united states. we make this recommendation with our eyes wide open fully recognizing that this would likely result in an increase in apple's u.s. taxes. but we strongly believe that such comprehensive reform would be fair to all taxpayers and would keep america globally competitive and would promote u.s. economic growth. host: why does tim cook want to pay more taxes? guest: well, two reasons. i don't know, of course. i'm not inside his head. but if i were advising him there would be two reasons. one is the firm's reputation. apple is a consumer oriented company and they are very concerned about their image and being cool and socially aware. so, if they are perceived as being not paying their fair share of taxes that could greatly hurt their reputation.

you see this with other companies as well. amazon. starbucks. the more consumer oriented you are the more you will be concerned about that. the other reason -- this is another chapter in the story -- multinational corporations have about $2 trillion trapped offshore and apple i believe has about only $100 billion trapped offshore. they would very much like to bring that money back home. so, i think that they are willing to pay a praoeuice in the short term in order bring that cash back home. host: explain what you mean by trapped. guest: what has happened over the years is u.s. multinationals have become very proficient at shifting their profits out of the united states.

they become so good at it that most of their earnings are now offshore in tax havens. the way the u.s. tax law is constructed is you don't have to pay any u.s. tax on those fortune profits until you bring them home. if you are just talking about small amounts of money that is ok and what is really ok for the multinationals is that all during while they are doing this their effective tax rates go down and reported profits to wall street go up. so, they have been very good at profit shifting, they have kept their reported profits up on wall street, which raises their stock price, everything is good, but what has happened is they have been so good they have sort of been hoisted on their own petard as they say and they can't bring it home without having large hit on their u.s. -- it would be an enormous loss which would be unfavorably

viewed by wall street. so, they are in a very -- it is a very peculiar situation. host: who has the most money trapped overseas? guest: i can't -- some of the major companies and i don't know if i have it accurate, are certainly apple, general electric and all of the -- cisco, again all the major tech companies and major pharmaceutical companies have very large amounts. host: if that $2 trillion is trapped and came back how much would they have to pay? guest: they would have to pay 35% minus whatever tax they, whatever effective tax rate they paid previously in foreign country. because a lot of this is in tax havens that effective tax rate might be 2%, 3%, 4%. so it would be 25% or 30% times $2 trillion.

host: what would be the impact on ireland if this collapsed? guest: it would be very bad for ireland. ireland, as you know, has again through a severe downturn as a result of the financial crisis in 2008 and they are very dependent upon maintaining their position in the e.u. as the leading domicile for u.s. corporations. host: let me go back to this article in the "washington post." this is the third thing he says about you. it was sullivan who highlighted the absurdity of tax havens in which just a hpbdful of multinationals claimed to earn annual profits several times the country's entire g.d.p. and you mentioned ireland, bermuda. who are some others? guest: some other favorites are cayman islands, singapore, switzerlan switzerland, i mentioned bermuda. those are the usually go-to places. i divide them into two categories. places like singapore, switzerland and ireland will have real business activities there. they will have maybe factories

or distribution centers or regional headquarters. the bermudas and caymans or luxembourg would be another, they are more just financial centers where there is no real business activity, there is usually just letter box companies. host: the fourth point he makes is it was sullivan had in 2010 pieced together from public filings that apple had understated its reported profits to hide the fact it was paying a tax rate of less than 2% on its overseas profits shine being the spotlight on apple's tax avoidance schemes. do these companies have tax avoidance schemes? and is that un-american? guest: well, let me mention a little bit about apple. as i sit in my garage and look through the annual reports they were not on the radar because sort of the first thing you look at is their effective tax rate and it is 25% to 30% which is pretty high for a multinational in their position.

but -- and of course many years ago apple was not doing so well so it was not a subject of an issue of tax policy. but what i discovered just looking through the data is that even though they had a 25% rate they really were not -- in short, they were reporting a larger tax liability than they were actually paying. there's nothing wrong with this. it is good accounting because they were being very conservative but it sort of hid from the general public and even people like me the fact that they were paying very low taxes around the world. host: you hear all the time of corporations who do everything they can to avoid tax. for instance, there's a lot of people that take their company and don't sell it for cash, they sell it for stock. why do we allow that?

congress over the years. guest: why do people avoid taxes? host: no, not why do they avoid taxes. why do we allow that in the tax law. we see people doing it all the time and they are missing taxes. guest: one thing you hear -- i'm answering the question. one thing you are hearing from the multinationals now is don't blame us, you, congress, made the law. so, what we are doing is take advantage of what -- what do you expect us to do? we will take advantage of what we take advantage. our competitors are doing that. and i agree with that point of view. it is up to congress to make the laws. but what is dis epingenuous about the argument is the multi multinationals do make the law. they are so influential on capitol hill, they go well you made the law and we are just -- every time congress tries to modify the law, they are swarmed by tax lobbyists who insist this will be the end of the world. so, i think that one reason why congress allows this is that they can't -- it is impossible to change the law. it is impossible for them to get

the votes in the house and senate to make these kinds of changes. i can give you numerous examples of where there are very reasonable changes in the law proposed or a new loophole has been discovered and there are some in congress who are very vocal about closing it down but not enough to make a change in the law. host: i picked the chairman of the ways and means committee and just went into open secret to find out where his contributions came from the last year. top of something of a pac which is about $35,000 and it is a complicated nonpartisan place that you can contribute to and they will contribute on to the members. but i'm sorry to even get into that. but number two new york life insurance, number three select medical holdings, number four

$25,000 from blue cross blue ernst and young, aetna $15,000, raytheon. and you can go down the list. deloitte. look heed martin. ford motor company. you worked on capitol hill? guest: yes host: it goes on to goldman sachs and united parcel service all of this coming in to the chairman of the ways and means committee. does it work? guest: when you think about it we are talking about trillions before and now thousands. these are very small amounts of money. i think they are just tokens of appreciation or respect to the chairman. i really don't think they influence him in any major way. i think what -- from where i

sit, i think there is too much emphasis on the influence of contributions and not enough on lobbying. that is many multiples. host: what is the difference between getting a check in the mail and lobbying? guest: well, let me just -- most tax issues -- there are tax issues we see on television all the time. what is the rate. and there is partisan politics. and that is what usually dominates the headlines. that is only the upper crust of what is going on with tax policy. beneath the radar we have hundreds of issues in every tax bill that are technical, that are lobbied at the staff level, that are -- you have to hire technical lobbyists to do these types of things. so when you are talking about the details that matter to companies, they might i'm be $5

million or $50 million details that are not big enough or too complicated for the regular media. that is where the lobbying really has an impact. because there's not any public scrutiny and it is not about partisan politics any more. it is more about special interest politics and getting something specific for your company. host: how do they have an impact? just showing up at the office is all that is required? guest: i think there is really two types of lobbying. there is just the showing of the flag. you have proposed something, mr. camp. we don't like it. so, the national association of manufacturers might say that. i don't know if they have in particular. or some major corporation may say that and he will take that

into account. but when it comes down to the all important details of how this bill hwill be constructed, that is something that there's a lot of legitimate debate about how these things should be constructed, what is fair, right, wrong and how much does it cost. those details have to be worked out by staff, who are again they are always off the radar, then by the technical lobbyists. that is where they can have an enormous influence. host: what about you? how did you get interested in tax? guest: well, i became -- it is just an offshoot of my tremendous interest in economics and public policy. host: where did that start? guest: i was an undergraduate at harvar harvard. i didn't really know what i was doing there but i was looking for something to latch on to. i took the basic economics course and it was like i was

blind and i could see after taking that course. reading the newspaper, which was always -- i didn't really understand it previously and the world opened up to me. then having that epiphany i said i'm going to take a hell of a lot more course and i did. i got really immersed in economics. at harvard we had some great teachers. richard musgrave and alan auerbach and larry summers and my mentor dale jorgenson. it was great company at the time and i was very excited to get into that line of work. host: where did you get your ph.d.? guest: northwestern in evanston, illinois. host: then what. was that economics? guest: yes. that is where i met my wife and she has her p.h.d. in economics, too. then i was off to become what i thought i wanted to do is be a college professor because you only teach three classes a summer and dark three classes a week and get summers of.

i went to rutd gerst university and did that a year and got call from a friend at the treasury department and that was 1986 the year of tax reform and he said why don't you come down and work with us a while. i took a leave of absence and never went back. host: what do you tell genera generalists lak like myself that we don't understand from being on the outside looking in? guest: probably the main thing is you can't have everything that you want. politicians do this all the time. they oversell. we will lower your rates and simplify the system. and of course that is very attractive to most voters. and i think -- and we all are arm chair policy analysts. why can't would do this and that?

not to be condescending but it is more complicated than that. the reason for most people's cog r confusion is politicians have oversold what is possible. so, right now there is tremendous interest in tax reform which is way oversold because it will be very hard to deliver on that promise. so, part of my job and i think a tax analyst job is to tamp down expectations. the former fed chairman william martin used to say his job was to take away the punch bowl just as the party got started. that was with fed policy. i think that part of our job is to just, when the politicians get a little bit overenthusiastic about the possibilities we have to say no, that is not really going to be possible. host: how important to the tax writing max baucus chairman of

the finance committee and dave camp fourth quarter district of michigan, how important are they? guest: they are the chairmen and they are extremely important. all tax legislation goes through them. host: what kind of individual power do they have? guest: i think it is not like the 1950's where the chairmen were all-powerful. i think the leadership has become much more powerful relative to the committees. i think that the members are not as deferential to the chairman as they once were. but they are still incredibly powerful because they have large staffs and control the agenda and prestige of their position. host: here are the two of them talking in july of this year and i want you to explain if you would what you are hearing.

[video clip] >> everyone in the congress wants tax reform. it is different from healthcare which in the past is very political. that is political. this is not partisan. >> if you were a betting man would you say 50-50, 80-20? 25-75 something will get through? >> i rate it above 50%. >> above 50%, ok. what would you say the chance of getting something through kphaour committee and house of representatives? >> for all the reasons max mentioned and others it is important to look at this. i think it is over 50%. there is a real -- and i know there's a lot because this is bipartisan it more like a senator and house member working together that is important. but i can tell you the response i get from members of the committee and members of the house, they very much are interested in doing this and excited about doing it. host: before you answer that, sitting there interesting lly david rubenstein who runs car

little group which i -- carlisle group he is interviewing them at the economic club of washington. what is your reaction to this? guest: my reaction is the chairman of the committee naturally wants to have major tax legislation going through their committees. there is nothing wrong with that. that makes them important and increases their contributions and increases their prestige. naturally they are going to be cheerleaders for reform. if they don't say 50% nobody will but the sad reality is that maybe you want to divide that by 10. i think there is a 5% chance of any type of tax reform getting through soon. that goes back to the point i was making before. they are overselling. they are talking about lower rates and simplification but they are not talking about how they are going to pay for it.

it sis -- they are going to tell you the good parts but not the bad parts. i think chairman camp has done a commendable job of educating a lot of the business groups about some of the pain that will go with some of the benefits they want from tax reform. and chairman baucus has just released a very long 700-page draft of what his vision of a part of tax reform would look like. and the reaction from -- these are mostly business provisions -- has been very generally unfavorable because they are starting to fill in the details about where the tax, offsetting tax increases have to come from, and the business community is not very happy with that. host: you made a comment in one fof the signal sees that analysises that it won't be until fracking takes off before they will change anything. explain that. guest: we look at projections of where the budget deficit is going to be. and it is very gloomy as medicare and medicaid and social security costs pick up. but if you look back even over

m my, last 25 years i have been in washington, the projections have almost always been wrong. in the late 1990's we had the dot-com boom and everything was wonderful. the budget deficit disappeared and doing tax legislation was very easy. then of course an example in the other direction which nobody saw then of course an example in the other direction which nobody saw coming was the collapse of 2009. so, these changes that happen, the projections are just sort of smooth sailing best guess average projections of growth. if we have a very -- if something like fracking or nanotechnology or whatever the next new business surge is going to come from, if that helps the economy manufacture in a positive direction a lot of problems will melt away and politicians will take credit for

i it. let's hope that does happen. sometimes things go the other way as well. so, i think we content predict the future and can't predict where policy is going because of the tremendous uncertainty in the economy. host: when david stockton was here earlier he was head of o.m.b. i wanted to hear what he said about taxes and that is the same administration. [video clip] >> i resigned in 1985 because i kept trying and we did have a tax increase in 1982, another one in 1983. another one in 1984. we did make headway but when reagan won the election overwhelmingly and all the reaganites with their adam smith ties and all those california right wingers came in and said no more talk of raising taxes, the deficit will take care of

itself, we won the election. i said that is it for me. i did the best i could for one more budget cycle and got out of there. host: raising taxes. what is -- you are shaking your head. . i think that is guest: that is a great clip because the reagan era has, i think, is a lesson for what we're facing now. ronald reagan came into office in 1981, cut taxes dramatically. and then cut them a little too much because deficits grew and he had to raise taxes in 1982 and 1984. then since tax cutting was off the table, republics looked to tax reform as their mantra, their fiscal policy. i think that is what you are seeing right now. you are seeing there is really no more for any additional tax cuts so the republicans' attention is shifted to tax

reform that. is where they will focus the next few years. host: either the democrats or the republicans do a better job in your opinion on taxes? guest: well, i think they both do a lousy job. but i think in terms of tax reform i think the democrats are really absolutely uninterested. they are pretty much content with the way the system is. they have no -- you look at the record of the clinton administration, they raised taxes, they had lap holes. obama administration not so much but no appetite for tax reform. republicans usually put tax reform on the front burner so they are -- they are really a driving force behind reforming the tax code. host: here is tim geithner from the obama administration again talking about what he wants to do with taxes.

[video clip] >> we are going to propose a broad reform to broaden the base and eliminate a substantial fraction dozens of special tax preferences for businesses while creating a bunch of new ones. >> no. preserving a very limited number that are targeted against really one core objective which is to make sure that we are improving incentives for designing, creating and building stuff in the united states. >> let phame stop you there. we are talking about picking winners and losers. you would increase or create tax incentives for building advanced technology vehicles at the expense of other vehicles -- i shouldn't say at expense but in the other kinds of vehicles. is that correct? >> you are putting me in a difficult position because i said in the next two weeks we will have a more comprehensive set of proposals but you are right to say that we are proposing to preserve a very limited number of core

incentives for investment in the united states. host: what do you say? guest: two things. it is great that mr. geithner was singing the praises of tax reform. we always admire that. however, he said he was going to release a plan and he really -- he released a very vague plan avoiding the details, avoiding the hard part of tax reform. and compared to what the reagan treasury did in 1984 and 1985 it was 1/100 of the effort. he was talking about eliminating loopholes but he was proposing new loopholes which were consistent with administration policy. so it is a situation where close everybody's loophole but mine. he is like we have to get rid of the loopholes but we want to propose a couple new ones. that is just not a consistent position at all.

host: so, in 2016, when the president is up for re-election, not this president but looking for the next president and somebody stands up and says if you elect me i'm going to reform taxes, what would your reaction be when you hear that? guest: it would be the same as the last election, which is, uh, politicians always oversell but they never over sell more than the election. i would say show me the details. mr. romney did a lot of promise being the prior election and he never supplied the details. because they would be very unattractive. so, i think that there is no chance that they can follow through on their promises. i do think that if mr. romney, for example, were elected we would have more attention on tax reform but ultimately even when republicans control everything they are not going to be able to reform the tax system because even though the partisan politics may be lined up the

special interests politics are just a mine field they can't work through. host: here you are in 1995 at the american enterprise institute. [video clip] >> the flat tax is a very simple tax. they claim it could be filled out on a postcard and i guess it could. on the business side there is always -- on the individual side there it is devoid of all special tax breaks. it is tax reform in the sense there are no credits for anything, no deduction, no special interest tax breaks whatsoever. that is extremely commendable. i think the simplicity is commendable. you eliminate things like the complicated tax rules involving pensions, corporate transactions, international transactions, something you don't mention in a college public finance course because it is too complicated. all of that will disappear.

host: are you a flat taxer. guest: it is amazing. is that 18 years ago? yes, i'm a flat taxer in one sense. i greatly believe we should get rid of all of the deductions and credits and lower the rates. i'm not necessarily in favor of a flat rate. i believe in some progressivity. but all during that period you mentioned the mid 1990's there was tremendous interest in national tax and my job was to -- flat tax and my job was to say nobody would like that more than me but you are not talking about the down side. again, they had way oversold the pweuftsdz benefits. they said the rate would have to be 20% or 19% but it has to be at least 30% and a 30% tax is a lot -- that is the reality and it is much less attractive. so what i kept saying to -- i wrote book on it at the time and

the conservatives were interested in what i had to say. i said i'm still in favor of tax reform but the benefits that you are saying are going to appear are not there. host: what is the fairest tax of all the taxes we pay? guest: well, there is no perfection out there and everybody's definition of fairness is different. i think just to go back to let's be reasonable. nobody should be getting away with a lot, with massive loop homes and there are some. and nobody should be paying too much. so keep coming back to the mantra let's get rid of all the credits and loopholes and get the rates, get rid of the preserv preferential rates on capital gains and make it even. host: what is the preferential rate on capital gains? guest: until the beginning of this year it was 15%. new it has been raised as part of one of budget deals to 20% and add 3.8% on top of that as part of the affordable care act.

so now the rate is 23.8%. but there's another part of capital gains that is very important, which is if you hold your stock or assets until death you pay no tax on your capital gains. that is where about half of all capital gains ends up. very wealthy people, most very wealthy people, their income comes not in salary or working around the clock. it comes from owning assets. and the income from that ultimately is realized through capital gains and those capital gains are treat -- have very preferential treatment. host: a couple of weeks ago when patty murray, senator from washington, and paul ryan congressman from wisconsin, the budget chairman announced there

were going to be no new taxes in the new budget agreement but went on to say we will pay more for our security through the airlines and all. why is that not a tax? guest: here we go again. as you will recall, president bush the tpeurfirst famously said read my lips no new taxes then immediately after he got elected he had to find more revenues. so, he went through a whole rigmarole about if it quacks lake a duck it is a duck. what is a tax. it is just a replay of that situatio situation. i think it was 1989. here we are again with republicans needing to raise revenue but can't trick the word tax so they have to find things that -- you have to find words like accumulating revenue or

contributions or fees that are like taxes but are not. now, what the technical dividing line is isn't administered by the i.r.s. there is no bright line. it is really unfortunate because a good way of raising revenue is, if you have to raise revenue, is through taxes. that is the fairest way. host: when did you discover that there was an additional 3.8% tax increase in the affordable care act? i mean, i don't even remember seeing it at all until after the bill was passed and weeks and months after that. guest: i don't recall the evolution of that bill. it was very convoluted and the tax was not the primary issue. but from where we sit at tax analysts we were looking at the tax side and the bill had to be revenue neutral according to the political constraints that were set up.

so, they looked at a wide variety of revenue raisers to make up for the gap and certainly there was a lot of interest in taxing because the democrats were in control, in tax being the wealthy to pay for that. i can't recall in what version that first surfaced. host: we started off talking about the article that was in the "washington post" by steve pear pearlstein that showed you sitting in your garage. why was that? is that where you work? guest: that is where i work a lot of time. it is quiet. it has a nice view. i like the fresh air. and that is where i find myself working. with wireless now you can work anywhere. host: what are some of the best sources for you when you are trying to analyze things? guest: just going through the data of the i.r.s. they have lots of data. congress department has lots of department. companies themselves provide a lot of data. it is difficult to go through and not everybody looks at it, so it can be a full-time job.

host: he says that you are a great one to look at footnotes in corporate documents. guest: well, that is where the action is. host: why? guest: the firms, in their corporate reporting, purport most of the details in -- put most of the details in the footnotes. so if you want to know what is going on with cisco, g.e. or pfizer, the first place you want to look is the income tax footnotes. host: would you say that everybody involved in paying, that has to pay tax, works at trying to hide things? i mean, do you see corporations that just lay it out there so you can see it all? guest: i think there si is -- i would disagree with the statement they are hiding things. under s.e.c things they are required to disclose anything that is significant. i think they are not anxious to disclose to tax authorities or to the public anything that they are doing which might be either

-- which might be construed as too aggressive so they will hide it. host: what was your reaction to the i.r.s. scandal about the conservatives and their 501-c-4's? guest: that is a hot button issue. i was very saddened by the whole thing first. host: why? guest: because the i.r.s., everybody loves to hate the i.r.s. and you just give them another good reason. if we want a better tax season one part is to strengthen the i.r.s. and fund it more. we could raise more revenue by funding i.r.s. more but we're cutting the i.r.s. budget so. this was very disappointing. but -- host: aren't they adding something like 16,000 new i.r.s. acts to police the tax on obama care?

guest: i'm not sure about that but i know overall -- they may be doing that but they might be shifting it from other more basic functions. i think that is the one problem is it is the flavor of the day we want to focus on one thing. well, it all comes out in the wash. you have to take it away from the less glamorous things like enforcement and taxpayer services. so, the -- host: was the i.r.s. guilty, in your opinion, of doing what the republicans were charging them of doing? guest: i don't know what went on. but i will say that when i read the report i thought it made a lot of statements which were not

-- which -- i thought the report overstated it. host: whose report? guest: the famous report from the inspector general of the treasury department. that got a huge amount of press. the accusation was that the i.r.s. was singling out tea party organizations. i thought the report overstated some of the problems and was not fair and balanced to the possibility that the i.r.s. was also monitoring other organizations. no now, so, when i looked at the data i found that it wasn't just tea party organizations that were being monitored but liberal groups were being monitored. host: do you think it was jeff blown -- overblown? guest: yes host: the whole controversy. guest: i don't know what went on in the offices but in my experience in public service i have never seen anybody overtly try to favor one political party over the other no matter what their personal views are. so i would be surprised if there was something, some overt wrongdoing going on there.

host: have you personally ever been a partisan? guest: i have partisan -- i have had partisan views. i don't really have any any more but i never worked for any party. host: why don't you have them any more? guest: because i dislike both parties. i don't want to be affiliated with either one. if you get tied down to one you find yourself defending positions that are not defensible and both parties have indefensible positions in different areas. host: who do you write for? who in your head when you sit in the garage, are you angry when you are doing this work? guest: no. i'm writing for people who are interested in tax policy. they may be staff members on the hill, people at i.r.s. tax attorneys, policy people, journalists. what i'm trying to do is just

apply some basic economics to the swaeugituation and see where the economics take you and i will say it is good economics or bad economics. now, you may have other reasons for favoring or disfavoring this policy but here is what the economics tell you. tha that, i think, does add a lot. host: how often do you write? guest: now i'm writing about once week and i do a blog once a week. host: can the general public read you? guest: they can read -- the general public can certainly read the blog. and selected items from the stuff we produce is available on the free website. host: how do they find you? what is the best way? guest: www-tax.orwww-tax.org. host: how did you get that? guest: back when the internet was starting we were just very early adopters. host: do you do teaching any more? guest: no.

i don't. host: who is the tpeurfirst, you know, tax congress person that you can remember in your own life that you dealt with, somebody that had the power of the chairman of the finance committee or chairman of the ways and means committee? guest: who was the first? host: in your professional life. when you worked up there on the joint tax committee who was your boss? guest: my pws, well chief of staff was ron pearlman who was assistant secretary of the treasury before then. and we -- it is just great staff. i can't tell you -- host: who was chairman of the

committee? guest: the chairman -- the joint committee is special animal. it sis jointly chaired by the chairman of the finance committee on the senate side and chairman of the ways and means committee onto house side and they just shift that back and forth. it is sort of a -- it is very unique on capitol hill because it is such an old staff. it sis originally from 1925 and it is back when members and committees didn't have large staffs. so they said why should we all have different staffs? we will have one nonpartisan staff to work on all of these issues. so, what was great about that job succeed worked the house side, senate side, worked with republicans, democrats and all you were trying to do was just to help them do the right thing. and that is a pretty nice job to have. host: a couple of chairmen of the ways and means committee had

rough go in history. and i will show one. he was very popular man in this town but i want to ask you why he got into such trouble. [video clip] >> i will fate these false charges and will prevail. i will wash away the mud that has been splattered upon my reputatio reputation. some ask how could you have done these things. the answer is simple. i didn't do them. talk is cheap. allegations come easily. in court they will be subjected to a higher standard. and when all is said and done they will fail the test and i will be vindicated. today i have entered a plea of guilty it two of the 13 criminal charges filed against me. i have entered this plea of guilt because the time has come to put this matter behind me and my family. after i learned of the jail sentence imposed upon my dear friend robert russo i realized i couldn't put my family and former congressional employees and friends and supporters in chicago through this trauma. host: he is a big guy, liked by

a lot of people on both sides of the aisle. used to ride back and forth to chicago with bob michael, a republican. went to prison for 15 months. did you ever have anything to do with rostenkowski? it was about mail fraud but it was more tkphreu indicated than that -- complicated than that. . we were at a technical level and we were not really involved with the political end of what -- from what we saw of chairman rostenkowski he was wonderful. he was very powerful and supportive of doing the right thing. he was an old-time chicago politician as well. i will say generally, not specifically about mr. mr. rostenkowski there is something on capitol hill and being a member of congress which after a few years gives you a sense of entitlement. i think it is having everybody lobby you all day long apbnd you just get used to thinking that perhaps you are entitled to maybe more than the average person is. so, it is -- and i grew up in

new jersey where there were a lot of corrupt politicians. and power corrupts. i don't think mr. rostenkowski did something that was -- i think it fwas $8,000 stamps that he may have cashed in, which is not the biggest sum of money in the world. but the principle is very important. host: here is another one right before him. he was chairman back in the 1991 1990's, wilburs mills. thanks to jack kelly's website on youtube here is those who have never heard of wilbur mills from arkansas chairman of the ways and means committee for 16 years. [video clip] >> what did your wife say about the headlines this morning? >> what? >> what did your wife say today when you talked?

>> we are canceling the show. >> which show? >> what show? >> no, that is not true. >> well, you know it is. >> i'm not canceled. >> you know it is. >> how are you feeling now that the american public will react to your attention to miss fox? >> they should react very favorably. all i'm trying to do is to launch a career. >> don't you think this looks bad for you personally as a married chairman of the house ways and means committee though? >> my wife is in on it. we've got to go. >> thank you. >> thank you. would you all let me leave here

now? host: that was back in 1974, i think. he had been out in the car with fanny fox was her name, she was from argentina -- she is an argentine. argentin argentina. before it was over he had to resign. he was an alcoholic. he worked on alcoholism the rest of his life. but he was incredibly powerful. guest: he was tax policy very early on. we were talking about the power of the chairman. he had absolute power for every piece of tax legislation that went through. and he was a great legislator. but i think just speaking generall generally, when somebody becomes chairman their i.q. goes up 40%. all of a sudden members who are not considered prestigious,

everybody loves the chairman because everybody wants something from the chairman. then the seniority system where you have people who are getting older and less effective and i think that is not a good system. there is too much emphasis on the power of the chairman and too much emphasis on those who last the longest have the most power and that is not necessarily the best way it run the airline. host: steve pearlstein closed his article by talking about mark lebowics's book and he said it is an amusing but ultimately flawed portrait of washington. what is missing are people like marty sullivan talented hard working professionals who are motivated to do right for the country and don't make big money and don't get much publicity and

won't be found at the annual white house correspondent's dinner. ever been to that dinner? guest: no, not at all. there are lots of people in this town like myself who are working in the weeds, a lot of economists, a lot of public service oriented folks who write papers and write articles and are watch dogs. i'm just one of many. i happen to get a little more press attention. there is a lot of us out here. there sis -- i went to a going away party for an old treasury economist like 20 years and he gave a great speech. he said when i came to washington -- and that would be in the 1950's -- i wanted to change the law. i wanted to see what i could do

to make law better. he said after working at the treasury department for 30 years, what i'm most proud of is what i kept out of the law. and that is really what we all are doing. presidents and congressmen overpromise and we have to keep pulling them back to reality on what is possible. there's a lot of us. working behind the scenes. host: i can't end this without going back to your high school days, jesuit high school. they are often known to be questioners. did that have any impact on you? guest: for sure. it was a great education. i went to a jesuit high school st. peter's in jersey city, new jersey. in the midst of all of the crime and pollution that was going on outside the walls, we were inside the walls learning greek and latin and studying history and challenging each other philosophicall philosophically.

it was a great place to learn. host: whether impact is it that you are five out of a family of eight children? guest: well, it is great to have a lot of brothers and sisters. we didn't have a lot to go host: marty sullivan. you can go to tax.org and read your blog. you are with tax analysts. we thank you very much for joining us. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2014] >> for a free transcript of this program, visit us at our website. transcripts are also

available at c-span podcasts. >> coming up next, a look at the restoration project underway at the capitol dome. hearing confirmation for the cia. >> president obama returned to the white house earlier today with his dosha -- with his daughters sasha and malia. michelle obama will remain in hawaii a few more days. president is artie focusing his attention on unemployment benefits that retired last month. he speaking tuesday at an event at the white house.

the senate is focusing on unemployment benefits as well. senators are considering a three-month extension. senatorsf democratic held a conference call with reporters to discuss the possible extension. here is what new york senator charles schumer had to say. >> i think that it will have an effect and hurt their chances in the 2014 elections. plates beneath our politics have shifted over the last several years. the first five years of president obama's term the two biggest issues were the deficit and obamacare. not anymore. it is middle-class incomes, creation of jobs, getting the economy going at a better rate than it has been going. if republicans blocked this renewal it is goin p